Climate of Change

By PAUL KRUGMAN , NY Times, Op Ed, Feb. 27, 2009

Elections have consequences. President Obama’s new budget represents a huge break, not just with the policies of the past eight years, but with policy trends over the past 30 years. If he can get anything like the plan he announced on Thursday through Congress, he will set America on a fundamentally new course.

The budget will, among other things, come as a huge relief to Democrats who were starting to feel a bit of postpartisan depression. The stimulus bill that Congress passed may have been too weak and too focused on tax cuts. The administration’s refusal to get tough on the banks may be deeply disappointing. But fears that Mr. Obama would sacrifice progressive priorities in his budget plans, and satisfy himself with fiddling around the edges of the tax system, have now been banished.

For this budget allocates $634 billion over the next decade for health reform. That’s not enough to pay for universal coverage, but it’s an impressive start. And Mr. Obama plans to pay for health reform, not just with higher taxes on the affluent, but by putting a halt to the creeping privatization of Medicare, eliminating overpayments to insurance companies.

On another front, it’s also heartening to see that the budget projects $645 billion in revenues from the sale of emission allowances. After years of denial and delay by its predecessor, the Obama administration is signaling that it’s ready to take on climate change.

And these new priorities are laid out in a document whose clarity and plausibility seem almost incredible to those of us who grew accustomed to reading Bush-era budgets, which insulted our intelligence on every page. This is budgeting we can believe in.

Many will ask whether Mr. Obama can actually pull off the deficit reduction he promises. Can he actually reduce the red ink from $1.75 trillion this year to less than a third as much in 2013? Yes, he can.

Right now the deficit is huge thanks to temporary factors (at least we hope they’re temporary): a severe economic slump is depressing revenues and large sums have to be allocated both to fiscal stimulus and to financial rescues.

But if and when the crisis passes, the budget picture should improve dramatically. Bear in mind that from 2005 to 2007, that is, in the three years before the crisis, the federal deficit averaged only $243 billion a year. Now, during those years, revenues were inflated, to some degree, by the housing bubble. But it’s also true that we were spending more than $100 billion a year in Iraq.

So if Mr. Obama gets us out of Iraq (without bogging us down in an equally expensive Afghan quagmire) and manages to engineer a solid economic recovery — two big ifs, to be sure — getting the deficit down to around $500 billion by 2013 shouldn’t be at all difficult.

But won’t the deficit be swollen by interest on the debt run-up over the next few years? Not as much as you might think. Interest rates on long-term government debt are less than 4 percent, so even a trillion dollars of additional debt adds less than $40 billion a year to future deficits. And those interest costs are fully reflected in the budget documents.

So we have good priorities and plausible projections. What’s not to like about this budget? Basically, the long run outlook remains worrying.

According to the Obama administration’s budget projections, the ratio of federal debt to G.D.P., a widely used measure of the government’s financial position, will soar over the next few years, then more or less stabilize. But this stability will be achieved at a debt-to-G.D.P. ratio of around 60 percent. That wouldn’t be an extremely high debt level by international standards, but it would be the deepest in debt America has been since the years immediately following World War II. And it would leave us with considerably reduced room for maneuver if another crisis comes along.

Furthermore, the Obama budget only tells us about the next 10 years. That’s an improvement on Bush-era budgets, which looked only 5 years ahead. But America’s really big fiscal problems lurk over that budget horizon: sooner or later we’re going to have to come to grips with the forces driving up long-run spending — above all, the ever-rising cost of health care.

And even if fundamental health care reform brings costs under control, I at least find it hard to see how the federal government can meet its long-term obligations without some tax increases on the middle class. Whatever politicians may say now, there’s probably a value-added tax in our future.

But I don’t blame Mr. Obama for leaving some big questions unanswered in this budget. There’s only so much long-run thinking the political system can handle in the midst of a severe crisis; he has probably taken on all he can, for now. And this budget looks very, very good.

Bobby Jindal and Pat Paulsen: Separated at Birth?

Bobby Jindal's State of the Republican Party Address? Thanks, Pat Paulsen for seeing this 40 years before his time

Bobby Jindal and Pat Paulsen: Separated at Birth?

Bobby Jindal = Pat Paulsen for President , 2009 neo-con edition

.. at least Pat was clear it was a joke. (rent the Smothers brothers show for reference)

And it was so nice of Jindal's Lousiana to "pull themselves up by their bootstraps" that only cost the U.S. taxpayer $150 billion. We're happy to help.. .just acknowledge it, Bobby. Or perhaps you'd prefer to pay it back now. (And why did they need the $150 billion anyway? Perhaps poor pre-planning for an evident oncoming disaster. Now who might have missed that one. Hmmmm... let..me.. think...

I Ponied Up for Sheryl Crow?

By MAUREEN DOWD, NY Times

LOS ANGELES

Talk about being teed off.

The economy is croaking and bankers are still partying at a golf tournament here on our dime.

It’s a good argument for nationalization, or better yet, internationalization. Outsource the jobs of these perfidious, oblivious bank executives to Bangalore; Bollywood bashes have to cost less than Hollywood ones.

The entertainment Web site TMZ broke the story Tuesday that Northern Trust of Chicago, which got $1.5 billion in bailout money and then laid off 450 workers, flew hundreds of clients and employees to Los Angeles last week and treated them to four days of posh hotel rooms, salmon and filet mignon dinners, music concerts, a PGA golf tournament at the Riviera Country Club with Mercedes shuttle rides and Tiffany swag bags.

“A rep from the PGA told us Northern Trust wrote one big, fat check in order to sponsor the event,” TMZ reported.

Northern No Trust had a lavish dinner at the Ritz Carlton on Wednesday with a concert by Chicago (at a $100,000 fee); rented a private hangar at the Santa Monica Airport on Thursday for another big dinner with a gig by Earth, Wind & Fire, and closed down the House of Blues on Sunset Strip on Saturday (at a cost of $50,000) for a dinner and serenade by Sheryl Crow.

In the ignoble tradition of rockers who sing for huge sums to sketchy people when we’re not looking, Crow — in her stint as a federal employee — warbled these lyrics to the oblivious revelers:

“Slow down, you’re gonna crash,
Baby, you’re a-screaming it’s a blast, blast, blast
Look out babe, you’ve got your blinders on ...
But there’s a new cat in town
He’s got high payin’ friends
Thinks he’s gonna change history.”

Northern Untrustworthy even offered junketeers the chance to attend a seminar on the credit crunch where they could no doubt learn that the U.S. government is just the latest way to finance your deals and keep your office swathed in $87,000 area rugs.

In what is now an established idiotic ritual of rationalization, the bank put out a letter noting that it “did not seek the government’s investment” even though it took it, and that it had raised $3 million for the Los Angeles Junior Chamber of Commerce Charity Foundation and other nonprofits. They riposted that they have a contract to do it every year for five years; but this isn’t every year.

The bank cloaks itself in a philanthropic glow while wasting our money, acting like the American Cancer Society when in fact it’s a cancer on American society.

It asserted that it earned an operating net income of $641 million last year and acted as though it did Americans a favor by taking federal cash.

I would ask Northern No Trust: If you’re totally solvent, why are you taking my tax dollars? If you’re not totally solvent, why are you giving my tax dollars to Sheryl Crow?

Coming in a moment when skeptical and angry Americans watched A.I.G., Citigroup, General Motors and Chrysler — firms that had already been given a federal steroid injection — get back in line for more billions, the golf scandal was just one more sign that the bailed-out rich are different from you and me: their appetites are unquenchable and their culture is uneducable.

President Obama served them notice on Tuesday night in his Congressional address, saying: “This time, C.E.O.’s won’t be able to use taxpayer money to pad their paychecks or buy fancy drapes or disappear on a private jet. Those days are over.”

But will they notice?

John “Antique Commode” Thain had to be ordered by a judge to tell Andrew Cuomo’s investigators which Merrill Lynch employees got those $3.6 billion in bonuses that Thain illicitly shoved through as his firm was failing and being taken over by Bank of America with the help of a $45 billion bailout. Kenneth Lewis, the Bank of America C.E.O., made the absurd assertion to Congress that his bank had “no authority” to stop the bonuses, even though he knew about them beforehand.

“They find out they’re $7 billion off on the estimate of losses for the fourth quarter and they never think maybe we should go back and adjust these bonuses?” Cuomo told me, as Thain was finally responding to investigators on Tuesday at the New York attorney general’s office. “He refused to answer questions on the basis that ‘the Bank of America didn’t want me to.’ You can take the Fifth Amendment or you can answer questions. But there’s no Bank of America privilege. The Bank of America doesn’t substitute for the Constitution. And who’s the Bank of America, by the way?”

He gets incensed about how ingrained, indoctrinated and insensitive the ex-masters of the universe are. “They think of themselves as kings and queens,” he said. And they’re not ready to abdicate.

What Part of ‘Stimulus’ Don’t They Get?

Imagine yourself jobless and struggling to feed your family while the governor of your state threatens to reject tens of millions of dollars in federal aid earmarked for the unemployed. That is precisely what is happening in poverty-ridden states like Louisiana and Mississippi where Republican governors are threatening to turn away federal aid rather than expand access to unemployment insurance programs in ways that many other states did a long time ago.

What makes these bad decisions worse is that they are little more than political posturing by rising Republican stars, like Gov. Bobby Jindal of Louisiana and Gov. Mark Sanford of South Carolina. This behavior reinforces the disturbing conclusion that the Republican Party seems more interested in ideological warfare than in working on policies that get the country back on track.

Fortunately, as President Obama prepares for his first address to Congress on Tuesday evening, voters of both parties have noticed. About three-quarters of those polled in a recent New York Times/CBS News survey — including more than 60 percent of Republicans — said Mr. Obama has been trying to work with Republicans. And 63 percent said Republicans in Congress opposed the stimulus package primarily for political reasons, not because they thought it would be bad for the economy. It should be sobering news for Republicans that about 8 in 10 said the party should be working in a bipartisan way.

The Republican Party’s attacks on the unemployment insurance portion of the stimulus package are a perfect example. States that accept the stimulus money aimed at the unemployed are required to abide by new federal rules that extend unemployment protections to low-income workers and others who were often shorted or shut out of compensation. This law did not just materialize out of nowhere. It codified positive changes that have already taken place in at least half the states.

To qualify for the first one-third of federal aid, the states need to fix arcane eligibility requirements that exclude far too many low-income workers. To qualify for the rest of the aid, states have to choose from a menu of options that include extending benefits to part-time workers or those who leave their jobs for urgent family reasons, like domestic violence or gravely ill children.

Data from the National Employment Law Project, a nonprofit group, show that 19 states qualify for some of the federal financing and that a dozen others would become eligible by making one or two policy changes. Unemployed workers are worst off in the Deep South, where relatively few people are eligible to receive payments. Louisiana, Mississippi and Texas stand out.

The governors are blowing smoke when they suggest that the federal unemployment aid would lead directly to new state taxes. No one knows what the economic climate will be when the federal aid has been used up several years from now. But by dumping billions of dollars into shrinking state unemployment funds, which puts money into the hands of people who spend it immediately on food and shelter, the stimulus could help the states through the recession and into a time when unemployment trust funds can be replenished. In other words, the stimulus could make a tax increase less likely.

But even if new taxes are required at some point, the new federal standards would protect more unemployed workers than ever before and bring states like Louisiana, Mississippi and Texas into the 21st century.

Governors like Mr. Jindal should be worrying about how to end this recession while helping constituents feed and house their families — not about finding ways to revive tired election-year arguments about big spending versus small government.

Soup-Kitchen Accounting

By JAMES DEITRICK and MICHAEL GRANOF

Austin, Tex.

TIMOTHY GEITHNER, the Treasury secretary, has pledged that the second bank bailout will be characterized by far greater transparency than the first on the part of the financial institutions. If he is sincere in his goal, then there is a simple accounting procedure that should be a part of the plan: the beneficiaries of taxpayer financing should have to keep track of their money in the same way nonprofits must.

Nonprofit accounting is designed to ensure that the recipients of grants from the federal government and other benefactors are held accountable for the funds they receive. Regrettably, the big banks that have been granted billions from the Troubled Asset Relief Program are less transparent in their financial reporting than the local soup kitchen that gets federal support.

Nonprofits use what is known as “fund accounting.” Fund accounting requires that a separate set of books be maintained for all grants that are designated for a specific activity. The aim is to ensure that the resources are spent for their intended purpose.

Executives of banks that have received TARP cash have said that it is too hard to account separately for how they spend their federal dollars. Money is fungible, they argue, and therefore they cannot readily distinguish between outlays of their own resources and those provided by the government. But that’s the type of doublespeak that would get the head of a town’s homeless shelter thrown in jail. If bankers are unable to segregate cash by source and specifically account for expenditures, why are they in charge of banks in the first place?

Were a bank or other bailout beneficiary required to maintain separate accounts for its federal receipts, then independent auditors could track all direct outlays of those funds. All they would have to do is follow the checks drawn on the accounts used for government money.

It’s true that there would still be opportunities for mischief. For example, a bank executive who has received TARP money could use the bank’s regular resources to purchase a $50 million jet or pay himself a bonus while reserving the TARP funds for routine loans.

However, this is where additional practices common to federal financial assistance come into play. Before a charity can receive a federal grant, it must prepare a proposal outlining precisely what it will do with the funds. Bailout recipients should do the same, or at least sign contracts agreeing to spend the money in accordance with terms set forth by the Treasury and to refrain from certain types of expenditures during these troubled times.

Similarly, charities are asked to provide detailed financial reports at least once a year to the federal agencies overseeing their grants. In the case of banks, the Treasury (or some other regulatory agency), could require quarterly “accountability reports” that include schedules detailing new loans, renegotiated loans, entity operating expenses, dividend payments, purchases of Treasury shares, debt retirement, maintenance of reserve or capital requirements and purchases of derivatives.

In addition, TARP recipients should be compelled to produce schedules that quantify the riskiness of their portfolios. These could be based on models that they now use for internal risk assessment, or that bank examiners have developed. This type of information, when compared with similar data from prior years, would go a long way toward determining whether the TARP funds were used for what Congress and the Treasury intended.

Thanks to the Single Audit Act of 1984 and supporting regulations from the Office of Management and Budget, governmental entities and not-for-profit organizations receiving federal assistance must submit to independent audits. TARP recipients should do the same. The auditors would not only attest to the integrity of the recipients’ financial data but also report on the extent to which they complied with the terms of the grant. If violations were found, the auditors would be charged with reporting them to the appropriate oversight agency.

Charity is accountable. TARP recipients should be, too.

James Deitrick and Michael Granof are professors of accounting at the University of Texas at Austin

Decade at Bernie’s

By PAUL KRUGMAN, Feb 16, 2009, NY Times

By now everyone knows the sad tale of Bernard Madoff’s duped investors. They looked at their statements and thought they were rich. But then, one day, they discovered to their horror that their supposed wealth was a figment of someone else’s imagination.

Unfortunately, that’s a pretty good metaphor for what happened to America as a whole in the first decade of the 21st century.

Last week the Federal Reserve released the results of the latest Survey of Consumer Finances, a triennial report on the assets and liabilities of American households. The bottom line is that there has been basically no wealth creation at all since the turn of the millennium: the net worth of the average American household, adjusted for inflation, is lower now than it was in 2001.

At one level this should come as no surprise. For most of the last decade America was a nation of borrowers and spenders, not savers. The personal savings rate dropped from 9 percent in the 1980s to 5 percent in the 1990s, to just 0.6 percent from 2005 to 2007, and household debt grew much faster than personal income. Why should we have expected our net worth to go up?

Yet until very recently Americans believed they were getting richer, because they received statements saying that their houses and stock portfolios were appreciating in value faster than their debts were increasing. And if the belief of many Americans that they could count on capital gains forever sounds naïve, it’s worth remembering just how many influential voices — notably in right-leaning publications like The Wall Street Journal, Forbes and National Review — promoted that belief, and ridiculed those who worried about low savings and high levels of debt.

Then reality struck, and it turned out that the worriers had been right all along. The surge in asset values had been an illusion — but the surge in debt had been all too real.

So now we’re in trouble — deeper trouble, I think, than most people realize even now. And I’m not just talking about the dwindling band of forecasters who still insist that the economy will snap back any day now.

For this is a broad-based mess. Everyone talks about the problems of the banks, which are indeed in even worse shape than the rest of the system. But the banks aren’t the only players with too much debt and too few assets; the same description applies to the private sector as a whole.

And as the great American economist Irving Fisher pointed out in the 1930s, the things people and companies do when they realize they have too much debt tend to be self-defeating when everyone tries to do them at the same time. Attempts to sell assets and pay off debt deepen the plunge in asset prices, further reducing net worth. Attempts to save more translate into a collapse of consumer demand, deepening the economic slump.

Are policy makers ready to do what it takes to break this vicious circle? In principle, yes. Government officials understand the issue: we need to “contain what is a very damaging and potentially deflationary spiral,” says Lawrence Summers, a top Obama economic adviser.

In practice, however, the policies currently on offer don’t look adequate to the challenge. The fiscal stimulus plan, while it will certainly help, probably won’t do more than mitigate the economic side effects of debt deflation. And the much-awaited announcement of the bank rescue plan left everyone confused rather than reassured.

There’s hope that the bank rescue will eventually turn into something stronger. It has been interesting to watch the idea of temporary bank nationalization move from the fringe to mainstream acceptance, with even Republicans like Senator Lindsey Graham conceding that it may be necessary. But even if we eventually do what’s needed on the bank front, that will solve only part of the problem.

If you want to see what it really takes to boot the economy out of a debt trap, look at the large public works program, otherwise known as World War II, that ended the Great Depression. The war didn’t just lead to full employment. It also led to rapidly rising incomes and substantial inflation, all with virtually no borrowing by the private sector. By 1945 the government’s debt had soared, but the ratio of private-sector debt to G.D.P. was only half what it had been in 1940. And this low level of private debt helped set the stage for the great postwar boom.

Since nothing like that is on the table, or seems likely to get on the table any time soon, it will take years for families and firms to work off the debt they ran up so blithely. The odds are that the legacy of our time of illusion — our decade at Bernie’s — will be a long, painful slump.

Obama Riding the Wave

By BOB HERBERT

Listening to President Obama, I was struck by how well he understands that most voters are not driven by ideology and are not searching for politically orthodox leadership. Most want leaders who speak to their needs — especially in this time of economic crisis — and a government that works.

Republicans in Congress — all but completely united in their effort to build a wall of obstruction in the path of President Obama’s economic revitalization effort — seem to be missing this essential point.

In a conversation with a small group of columnists aboard Air Force One on Friday, the president discussed the fight over his stimulus package, which was in the process of gaining final passage as he flew from Washington to Chicago for a brief rest with his family.

He said that the fact that he’d been rebuffed so far in his quest for bipartisanship would not stop him from reaching out for Republican support.

“Going forward,” he said, “each and every time we’ve got an initiative, I’m going to go to both Democrats and Republicans and I’m going to say, ‘Here’s my best argument for why we need to do this. I want to listen to your counterarguments. If you’ve got better ideas, present them. We will incorporate them into any plans that we make, and we are willing to compromise on certain issues that are important to one side or the other in order to get stuff done.’ ”

When I asked him if there was any reason to believe that the G.O.P. had made a good-faith effort at bipartisanship, given the fact that only three Republicans voted for the stimulus plan in the Senate and none in the House, he said he did not want to question the motives or sincerity of those who opposed the plan.

But he made a point of adding, “Now, I have to say that given that they were running the show for a pretty long time prior to me getting there, and that their theory was tested pretty thoroughly and it’s landed us in the situation where we’ve got over a trillion-dollars’ worth of debt and the biggest economic crisis since the Great Depression, I think I have a better argument in terms of economic thinking.”

He also made it clear that he won’t let his desire for bipartisanship undermine important initiatives. “I’m an eternal optimist,” he said. “That doesn’t mean I’m a sap.”

Mr. Obama’s tone and demeanor during the nearly hourlong interview was a duplicate of his nationally televised press conference last week.

He was relaxed and had complete command of a range of complex issues, including the troubled banking sector, health care reform and the need to do more in terms of innovative education initiatives.

But beyond his specific policies (and whether one supports them or not), Mr. Obama is emerging as the very model of the type of person one would want in high public office. He is intelligent, mature, thoughtful, calm in the face of crises and, if the nation is lucky, maybe even wise.

When asked about the sharp drop in the stock markets after Treasury Secretary Tim Geithner announced an expanded bank bailout plan last week, Mr. Obama replied:

“I am not planning based on a one-day market reaction. In fact, you can argue that a lot of the problems we’re in have to do with everybody planning based on one-day market reactions, or three-month market reactions, and as a consequence nobody was taking the long view.

“My job is to help the country take the long view — to make sure that not only are we getting out of this immediate fix, but we’re not repeating the same cycle of bubble and bust over and over again; that we’re not having the same energy conversation 30 years from now that we had 30 years ago; that we’re not talking about the state of our schools in the exact same ways we were talking about them in the 1980s; and that at some point we say, ‘You know what? If we’re spending more money per-capita on health care than any nation on earth, then you’d think everybody would have coverage and we would see lower costs for average consumers, and we’d have better outcomes.’ ”

Near the end of the interview, the president said that there are certain moments in history when significant change is possible.

“It’s not a certainty,” he said, “but it’s possible.”

He said he believed that it’s very difficult for any single individual to actually set that kind of “momentum” for change in motion. But when that historical wave is there, he said, “I think you can help guide it.”

When asked if we are in one of those moments now, he said, “Yes. I firmly believe that.”

Obama Gains G.O.P. Support From Governors

By JACKIE CALMES, NY Times Feb. 17, 2009

WASHINGTON — President Obama must wish governors could vote in Congress: While just three of the 219 Republican lawmakers backed the $787 billion economic recovery plan that he is signing into law on Tuesday, that trifling total would have been several times greater if support among the 22 Republican state executives counted.

The contrast reflects the two faces of the Republican Party these days.

Leaderless after losing the White House, the party is mostly defined by its Congressional wing, which flaunted its anti-spending ideology in opposing the stimulus package. That militancy drew the mockery of late-night television comics, but the praise of conservative talk-show stars and the party faithful.

In the states, meanwhile, many Republican governors are practicing a pragmatic — their Congressional counterparts would say less-principled — conservatism.

Governors, unlike members of Congress, have to balance their budgets each year. And that requires compromise with state legislators, including Democrats, as well as more openness to the occasional state tax increase and to deficit-spending from Washington.

Across the country, from California’s Arnold Schwarzenegger to Florida’s Charlie Crist and New England’s Jim Douglas in Vermont and M. Jodi Rell in Connecticut, Republican governors showed in the stimulus debate that they could be allies with Mr. Obama even as Congressional Republicans spurned him.

“It really is a matter of perspective,” Mr. Crist said in an interview. “As a governor, the pragmatism that you have to exercise because of the constitutional obligation to balance your budget is a very compelling pull” generally.

With Florida facing a projected $5 billion shortfall in a $66 billion budget, and social costs rising, the stimulus package “helps plug that hole,” Mr. Crist said, “but it also helps us meet the needs of the people in a very difficult economic time.”

Mr. Obama’s two-year stimulus package includes more than $135 billion for states, to help them pay for education, Medicaid and infrastructure projects. Yet even that sum would cover less than half of the total budget deficits the states will face through 2010, according to the Center on Budget and Policy Priorities, a liberal research and advocacy organization.

The states’ reliance on the federal government in times of distress will be showcased this weekend, when the governors come to Washington for their annual winter meeting. Their focus will be on infrastructure needs and home foreclosures.

The disconnect between Republican members of Congress and governors recalls the mid-1990s, when Republicans took control of both the House and Senate for the first time in 40 years. After an initial public show of being partners in a “Republican revolution,” the partnership all but dissolved when governors strongly objected as the more dogmatic conservatives in Congress tried to cut domestic programs and then shut down the federal government in an unsuccessful showdown with President Bill Clinton.

Recently, Governors Schwarzenegger, Crist, Douglas and Rell joined 14 Democratic governors in signing a letter to Mr. Obama lauding his economic plan. Other Republicans would have signed on, said a person familiar with the letter’s drafting, but for party pressure in their states.

The National Governors Association sent a bipartisan letter of support to Congressional leaders of both parties, signed by its Democratic chairman, Edward G. Rendell of Pennsylvania, and Mr. Douglas, its Republican vice chairman. “The combination of funds for Medicaid, education and other essential services is critical for governors as they work to manage the downturn in their states and improve government for the long term,” it said.

Mr. Crist even campaigned last week with Mr. Obama in Florida for the recovery package.

“Whether it’s teachers or people on road crews helping our infrastructure, those in the health care arena as it might relate to Medicaid, all of these areas are important, all of them can produce jobs,” Mr. Crist said, adding, “Regardless of what your party is, Republican or Democrat, it really doesn’t matter. We have a duty and an obligation to the people who elected us, no matter what our position happens to be, to work together to get through this thing.”

Yet all 16 of Florida’s Republicans in Congress voted against the package. Representative Cliff Stearns condemned it during the final debate as an “unprecedented big-government grab for citizen reliance on the federal government.” Joe Scarborough, a former Republican congressman from Florida, called the bill “a steaming pile of garbage” on his cable television talk show.

The House Republican leader, John A. Boehner of Ohio, angrily dumped the 1,073-page bill to the floor during debate. In the Senate, John McCain of Arizona called it “nothing less than generational theft.” And Republicans in both chambers derided what they described, often misleadingly, as pork spending for the likes of marsh mouse preservation.

Many projects, however, reflected the job-creation wish lists that governors had sent in.

Utah’s Republican governor, Jon Huntsman Jr. sought up to $14.4 billion for roads, rail and sewer projects and for construction of a prison, courthouses and veterans’ nursing homes. Gov. Bob Riley of Alabama, another Republican, came to Washington to discuss transportation projects with his state’s Congressional delegation. “He’s going to make sure Alabama doesn’t miss out on the money we’re entitled to,” a spokesman said.

Mr. Obama began courting the governors before taking office. He invited them to Independence Hall in Philadelphia in December to discuss the economic challenges. Nearly all accepted.

In his opening remarks, Mr. Obama had “a special word” for the Republicans: “I offer you the same hand of friendship and cooperation that I offer our Democratic governors.” He deferred to Mr. Douglas, the Vermont Republican, to steer the discussion.

Privately, Republicans favorably contrasted Mr. Obama with the outgoing Republican president, George W. Bush, according to two participants.

Though Mr. Bush had been a governor — in good economic times — his relations with state executives were distant at best. Amid a downturn early in the decade, he unsuccessfully opposed $20 billion for the states. Last fall, he resisted some Republicans’ pleas for aid.

Mr. Douglas in January sought a meeting with the new administration at the White House office that is a liaison to governors. Instead, he got an Oval Office meeting with Mr. Obama.

When reporters briefly came in — the two men flanked the fireplace just as presidents and foreign heads of state typically do — Mr. Douglas praised Mr. Obama for his leadership. The stimulus bill “might be a little different” if he had written it, the Republican said. “But the essence of a recovery package is essential to get our nation’s economy moving.”

They Sure Showed That Obama

By FRANK RICH
AM I crazy, or wasn’t the Obama presidency pronounced dead just days ago? Obama had “all but lost control of the agenda in Washington,” declared Newsweek on Feb. 4 as it wondered whether he might even get a stimulus package through Congress. “Obama Losing Stimulus Message War” was the headline at Politico a day later. At the mostly liberal MSNBC, the morning host, Joe Scarborough, started preparing the final rites. Obama couldn’t possibly eke out a victory because the stimulus package was “a steaming pile of garbage.”

Less than a month into Obama’s term, we don’t (and can’t) know how he’ll fare as president. The compromised stimulus package, while hardly garbage, may well be inadequate. Timothy Geithner’s uninspiring and opaque stab at a bank rescue is at best a place holder and at worst a rearrangement of the deck chairs on the TARP-Titanic, where he served as Hank Paulson’s first mate.

But we do know this much. Just as in the presidential campaign, Obama has once again outwitted the punditocracy and the opposition. The same crowd that said he was a wimpy hope-monger who could never beat Hillary or get white votes was played for fools again.

On Wednesday, as a stimulus deal became a certainty on Capitol Hill, I asked David Axelrod for his take on this Groundhog Day relationship between Obama and the political culture.

“It’s why our campaign was not based in Washington but in Chicago,” he said. “We were somewhat insulated from the echo chamber. In the summer of ’07, the conventional wisdom was that Obama was a shooting star; his campaign was irretrievably lost; it was a ludicrous strategy to focus on Iowa; and we were falling further and further behind in the national polls.” But even after the Iowa victory, this same syndrome kept repeating itself. When Obama came out against the gas-tax holiday supported by both McCain and Clinton last spring, Axelrod recalled, “everyone in D.C. thought we were committing suicide.”

The stimulus battle was more of the same. “This town talks to itself and whips itself into a frenzy with its own theories that are completely at odds with what the rest of America is thinking,” he says. Once the frenzy got going, it didn’t matter that most polls showed support for Obama and his economic package: “If you watched cable TV, you’d see our support was plummeting, we were in trouble. It was almost like living in a parallel universe.”

For Axelrod, the moral is “not just that Washington is too insular but that the American people are a lot smarter than people in Washington think.”

Here’s a third moral: Overdosing on this culture can be fatal. Because Republicans are isolated in that parallel universe and believe all the noise in its echo chamber, they are now as out of touch with reality as the “inevitable” Clinton campaign was before it got clobbered in Iowa. The G.O.P. doesn’t recognize that it emerged from the stimulus battle even worse off than when it started. That obliviousness gives the president the opening to win more ambitious policy victories than last week’s. Having checked the box on attempted bipartisanship, Obama can now move in for the kill.

A useful template for the current political dynamic can be found in one of the McCain campaign’s more memorable pratfalls. Last fall, it was the Beltway mantra that Obama was doomed with all those working-class Rust Belt Democrats who’d flocked to Hillary in the primaries. The beefy, beer-drinking, deer-hunting white guys — incessantly interviewed in bars and diners — would never buy the skinny black intellectual. Nor would the “dead-ender” Hillary women. The McCain camp not only bought into this received wisdom, but bet the bank on it, pouring resources into states like Michigan and Wisconsin before abandoning them and doubling down on Pennsylvania in the stretch. The sucker-punched McCain lost all three states by percentages in the double digits.

The stimulus opponents, egged on by all the media murmurings about Obama “losing control,” also thought they had a sure thing. Their TV advantage added to their complacency. As the liberal blog ThinkProgress reported, G.O.P. members of Congress wildly outnumbered Democrats as guests on all cable news networks, not just Fox News, in the three days of intense debate about the House stimulus bill. They started pounding in their slogans relentlessly. The bill was not a stimulus package but an orgy of pork spending. The ensuing deficit would amount to “generational theft.” F.D.R.’s New Deal had been an abject failure.

This barrage did shave a few points off the stimulus’s popularity in polls, but its approval rating still remained above 50 percent in all (Gallup, CNN, Pew, CBS) but one of them (Rasmussen, the sole poll the G.O.P. cites). Perhaps the stimulus held its own because the public, in defiance of Washington’s condescending assumption, was smart enough to figure out that the government can’t create jobs without spending and that Bush-era Republicans have no moral authority to lecture about deficits. Some Americans may even have ancestors saved from penury by the New Deal.

In any event, the final score was unambiguous. The stimulus package arrived with the price tag and on roughly the schedule Obama had set for it. The president’s job approval percentage now ranges from the mid 60s (Gallup, Pew) to mid 70s (CNN) — not bad for a guy who won the presidency with 52.9 percent of the vote. While 48 percent of Americans told CBS, Gallup and Pew that they approve of Congressional Democrats, only 31 (Gallup), 32 (CBS) and 34 (Pew) percent could say the same of their G.O.P. counterparts.

At least some media hands are chagrined. After the stimulus prevailed, Scarborough speculated on MSNBC that “perhaps we’ve overanalyzed it, we don’t know what we’re talking about.” But the Republicans are busy high-fiving themselves and celebrating “victory.” Even in defeat, they are still echoing the 24/7 cable mantra about the stimulus’s unpopularity. This self-congratulatory mood is summed up by a Wall Street Journal columnist who wrote that “the House Republicans’ zero votes for the Obama presidency’s stimulus ‘package’ is looking like the luckiest thing to happen to the G.O.P.’s political fortunes since Ronald Reagan switched parties.” There hasn’t been this much delusional giddiness in these ranks since Monica Lewinsky promised a surefire Republican sweep in the 1998 midterms.

Not all Republicans are so clueless, whether in Congress or beyond. Charlie Crist, the moderate Florida governor who appeared with the president in his Fort Myers, Fla., town-hall meeting last week, has Obama-like approval ratings in the 70s. Naturally, the party’s hard-liners in Washington loathe him. Their idea of a good public face for the G.O.P. is a sound-bite dispenser like the new chairman, Michael Steele, a former Maryland lieutenant governor. Steele’s argument against the stimulus package is that “in the history of mankind” no “federal, state or local” government has ever “created one job.” As it happens, among the millions of jobs created by the government are the federal investigators now pursuing Steele for alleged financial improprieties in his failed 2006 Senate campaign.

This G.O.P., a largely white Southern male party with talking points instead of ideas and talking heads instead of leaders, is not unlike those “zombie banks” that we’re being asked to bail out. It is in too much denial to acknowledge its own insolvency and toxic assets. Given the mess the country is in, it would be helpful to have an adult opposition that could pull its weight, but that’s not the hand America has been dealt.

As Judd Gregg flakes out and Lindsey Graham throws made-for-YouTube hissy fits on the Senate floor, Obama should stay focused on the big picture in governing as he did in campaigning. That’s the steady course he upheld when much of the political establishment was either second-guessing or ridiculing it, and there’s no reason to change it now. The stimulus victory showed that even as president Obama can ambush Washington’s conventional wisdom as if he were still an insurgent.

But, as he said in Fort Myers last week, he will ultimately be judged by his results. If the economy isn’t turned around, he told the crowd, then “you’ll have a new president.” The stimulus bill is only a first step on that arduous path. The biggest mistake he can make now is to be too timid. This country wants a New Deal, including on energy and health care, not a New Deal lite. Far from depleting Obama’s clout, the stimulus battle instead reaffirmed that he has the political capital to pursue the agenda of change he campaigned on.

Republicans will also be judged by the voters. If they want to obstruct and filibuster while the economy is in free fall, the president should call their bluff and let them go at it. In the first four years after F.D.R. took over from Hoover, the already decimated ranks of Republicans in Congress fell from 36 to 16 in the Senate and from 117 to 88 in the House. The G.O.P. is so insistent that the New Deal was a mirage it may well have convinced itself that its own sorry record back then didn’t happen either.

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Herbert Hoover Lives

By FRANK RICH

HERE’S a bottom line to keep you up at night: The economy is falling faster than Washington can get moving. President Obama says his stimulus plan will save or create four million jobs in two years. In the last four months of 2008 alone, employment fell by 1.9 million. Do the math.

The abyss is widening. Of the 30 companies in the Dow Jones industrial index, 22 have announced job cuts since October. Unemployment is up in all 50 states, with layoffs at both high-tech companies (Microsoft) and low (Caterpillar). The December job loss in retailing is the worst since at least 1939. The new-home sales rate has fallen to its all-time low since record-keeping began in 1963.

What are Americans still buying? Big Macs, Campbell’s soup, Hershey’s chocolate and Spam — the four food groups of the apocalypse.

The crisis is at least as grave as the one that confronted us — and, for a time, united us — after 9/11. Which is why the antics among Republicans on Capitol Hill seem so surreal. These are the same politicians who only yesterday smeared the patriotism of any dissenters from Bush’s “war on terror.” Where is their own patriotism now that economic terror is inflicting far more harm on their constituents than Saddam Hussein’s nonexistent W.M.D.?

The House stimulus bill is an inevitably imperfect hodgepodge-in-progress. Obama’s next move, a new plan to prevent the collapse of America’s banks, may prove more problematic still, especially given the subpar record of the new Treasury secretary, Timothy Geithner, in warding off calamity while at the New York Fed. No one should expect the Republicans to give the new president carte blanche, fall blindly into lock step or be “post-partisan.” (Though that’s exactly what the G.O.P. demanded of Democrats with Bush: You were either with him or with the terrorists.)

But you might think that a loyal opposition would want to pitch in and play a serious role at a time of national peril. Not by singing “Kumbaya” but by collaborating on possible solutions and advancing a policy debate that many Americans’ lives depend on. As Raymond Moley, of F.D.R.’s brain trust, said of the cross-party effort at the harrowing start of that presidency in March 1933, Hoover and Roosevelt acolytes “had forgotten to be Republicans or Democrats” as they urgently tried to rescue their country.

The current G.O.P. acts as if it — and we — have all the time in the world. It kept hoping in vain that the fast-waning Blago sideshow would somehow impale Obama or Rahm Emanuel. It has come perilously close to wishing aloud that a terrorist attack will materialize to discredit Obama’s reversals of Bush policy on torture, military tribunals and Gitmo. The party’s sole consistent ambition is to play petty politics to gum up the works.

If anything, the Republican Congressional leadership seems to be emulating John McCain’s September stunt of “suspending” his campaign to “fix” the Wall Street meltdown. For all his bluster, McCain in the end had no fixes to offer and sat like a pet rock at the White House meeting on the crisis before capitulating to the bailout. His imitators likewise posture in public about their determination to take action, then do nothing while more and more Americans cry for help.

The problem is not that House Republicans gave the stimulus bill zero votes last week. That’s transitory political symbolism, and it had no effect on the outcome. Some of the naysayers will vote for the revised final bill anyway (and claim, Kerry-style, that they were against it before they were for it). The more disturbing problem is that the party has zero leaders and zero ideas. It is as AWOL in this disaster as the Bush administration was during Katrina.

If the country wasn’t suffering, the Republicans’ behavior would be a laugh riot. The House minority leader, John Boehner, from the economic wasteland of Ohio, declared on “Meet the Press” last Sunday that the G.O.P. didn’t want to be “the party of ‘No’ ” but “the party of better ideas, better solutions.” And what are those ideas, exactly? He said he’ll get back to us “over the coming months.”

His deputy, the Virginia congressman Eric Cantor, has followed the same script, claiming that the G.O.P. will not be “the party of ‘No’ ” but will someday offer unspecified “solutions and alternatives.” Not to be left out, the party’s great white hope, Sarah Palin, unveiled a new political action committee last week with a Web site also promising “fresh ideas.” But as the liberal blogger Markos Moulitsas Zúniga observed, the site invites visitors to make donations and read Palin hagiography while offering no links to any ideas, fresh or otherwise.

For its own contribution to this intellectual void, the Republican National Committee convened last week under a new banner, “Republican for a Reason.” Perhaps that unidentified reason will be determined by a panel of judges on a TV reality show. It had better be brilliant given that only five states (with 20 total electoral votes) now lean red in party affiliation, according to Gallup. At this rate the G.O.P. will be in Alf Landon territory by 2012.

The Republicans do have one idea, of course, but it’s hardly fresh: more and bigger tax cuts, particularly for business and the well-off. That’s the sum of their “alternative” stimulus plan. Obama has tried to accommodate this panacea, perhaps to a fault. Mainstream economists in both parties believe that tax cuts in the stimulus package will deliver far less bang for the buck than, say, infrastructure spending. The tax-cut stimulus embraced a year ago by the G.O.P. induced next-to-no consumer spending as Americans merely banked the savings or paid down debt.

We also now know conclusively that the larger Bush tax cuts, besides running up record deficits and exacerbating income inequality, were also at best a placebo on our road to ruin. In a January survey of economists, including former McCain advisers like Douglas Holtz-Eakin and Mark Zandi, The Washington Post determined that the job growth the Bush administration kept bragging about (“52 straight months!”) was a mirage inflated by the housing bubble. Job growth — about 2 percent — was in fact the most tepid of any eight-year period “since data collection began seven decades ago.” Gross domestic product grew at a slower pace than in any eight years since the Truman administration.

But even if tax cuts alone could jump-start a recovery, they couldn’t do the heavy lifting that Obama has promised and the country desperately needs: a down payment on a new economy to replace our dilapidated 20th-century model and bring back long-term growth. The Republicans don’t acknowledge the need for this transformation, or debate it in good conscience, preferring instead to hyperventilate over the contraceptives in a small family-planning program since removed from the stimulus bill. All it takes is the specter of condoms for the party of Vitter, Foley and Craig to go gaga.

The Republicans’ other preoccupation remains Rush Limbaugh, who is by default becoming their de facto leader. While most Americans are fearing fear itself, G.O.P. politicians are tripping over themselves in morbid terror of Rush.

These pratfalls commenced after Obama casually told some Republican congressmen (correctly) that they won’t “get things done” if they take their orders from Limbaugh. That’s all the stimulus the big man needed to go on a new bender of self-aggrandizement. He boasted that Obama is “more frightened” of him than he is of the Republican leaders in the House or Senate. He said of the new president, “I hope he fails.”

Obama no doubt finds Limbaugh’s grandiosity more amusing than frightening, but G.O.P. politicians are shaking like Jell-O. When asked by Andrea Mitchell of NBC News on Wednesday if he shared Limbaugh’s hope that Obama fails, Eric Cantor spun like a top before running off, as it happened, to appear on Limbaugh’s radio show. Mike Pence of Indiana, No. 3 in the Republican House leadership, similarly squirmed when asked if he agreed with Limbaugh. Though the Republicans’ official, poll-driven line is that they want Obama to succeed, they’d rather abandon that disingenuous nicety than cross Rush.

Most pathetic of all was Phil Gingrey, a right-wing Republican congressman from Georgia, who mildly criticized both Limbaugh and Sean Hannity to Politico because they “stand back and throw bricks” while lawmakers labor in the trenches. So many called Gingrey’s office to complain that the poor congressman begged Limbaugh to bring him on air to publicly recant on Wednesday. As Gingrey abjectly apologized to talk radio’s commandant for his “stupid comments” and “foot-in-mouth disease,” he sounded like the inmate in a B-prison-movie cowering before the warden after a failed jailbreak.

“It’s up to me to hijack the Obama honeymoon,” Limbaugh soon gloated, “and I’ve done it.” In his dreams. He has hijacked what’s left of the Republican Party; the Obama honeymoon remains intact. The nightmare is that we have so irrelevant, clownish and childish an opposition party at a moment when America is in an all-hands-on-deck emergency that’s as trying as war. To paraphrase a dictum that has been variously attributed to two of our most storied leaders in times of great challenge, Thomas Paine and George Patton, the Republicans should either lead, follow or get out of the grown-ups’ way.